WARNING⚠️
IS #BITCOIN DROPPING DUE TO A NEW CRISIS IN #DEFI?
💥Stream Finance has just COLLAPSED, leaving a hole of $530M and reviving fears of contagion in the ecosystem. 👇
WHAT HAPPENED?
* Stream Finance, creator of the stablecoin xUSD, reported a loss of $93M after a collapse in its "recursive looping" scheme.
* "Recursive looping" refers to a practice where a protocol uses assets generated by itself or by another protocol as collateral.
* The mechanism allowed minting xUSD with loans from Elixir (deUSD) and using it again as collateral to create more xUSD.
* Result: $530M in inflated assets, backed by only $162M in real assets.
A mirage of liquidity... The drop was immediate, xUSD plummeted by -76%
IS THE PROBLEM MUCH BIGGER?
* The direct damage is $93M, but there is $285M of toxic debt spread across protocols like Euler ($90M), Silo ($28M), and Morpho ($68M).
* Withdrawals were frozen and the firm Perkins Coie LLP is leading the investigation.
* Analysts revealed a circular scheme between xUSD and deUSD (from Elixir).
* Both were backing each other… creating hidden leverage.
-INDICATORS OF IRREGULARITIES BEFORE THE COLLAPSE
* The xUSD vault went from $40M to $400M in months… maintaining a "flat yield" of 15%.
* This would be impossible without leverage or external intervention.
* Four days before the collapse, Stream announced audits and transparency dashboards.
They promised institutional reserves... and delivered another failed experiment.
WHAT DOES THIS TEACH US?
* DeFi continues to not resolve its Achilles' heel: uncontrolled leverage and lack of real audit.
* Many protocols chase TVL at any cost, inflating figures with circular loops.
WHY DOES IT MATTER FOR BITCOIN?
Each collapse in DeFi generates forced sales of collateral, putting pressure on BTC and ETH.
And, above all, it erodes confidence in the entire #crypto market.
The lesson remains the same: if you don’t know where the yield is coming from… be careful
